The Bipartisan Campaign Reform Act—better known as the McCain-Feingold Act1—was signed into law in November 2002 by President George W. Bush. The groundwork for this bill had been laid during the preceding eight years. Most notably, the billionaire financier George Soros began promoting such legislation shortly after the 1994 midterm elections, when for the first time in nearly half a century, Republicans had won strong majorities in both houses of Congress. Political analysts at the time attributed the huge Republican gains in large part to the effectiveness of television advertising—most notably the “Harry and Louise” series where a fictional suburban couple exposed the many hidden, and distasteful, details of Hillary Clinton's proposals for a more socialized national health-care system. Indeed the 1994 election became, to a considerable degree, a referendum on this attempted government takeover of one-sixth of the U.S. economy—and on the Democratic President (Bill Clinton) who had tacitly endorsed it.

Soros was angry that such advertisements had proven to be capable of overriding the influence of the major print and broadcast news media, which, because they were overwhelmingly sympathetic to Democrat agendas, had given Hillary's plan a great deal of free, positive publicity for months. Three weeks after the 1994 elections, Soros announced that he intended to “do something” about “the distortion of our electoral process by the excessive use of TV advertising.”2 That “something” would be campaign-finance reform.

Starting in 1994, Soros's Open Society Institute (OSI) and a few other leftist foundations began bankrolling front groups and so-called “experts” whose aim was to persuade Congress to swallow the fiction that millions of Americans were clamoring for “campaign-finance reform.” This deceptive strategy was the brainchild of Sean Treglia, a former program officer with the Pew Charitable Trusts.3 Between 1994 and 2004, some $140 million of foundation cash was used to promote campaign-finance reform. Nearly 90 percent of this amount derived from just eight foundations, one of which was OSI, which contributed $12.6 million to the cause.4 Among the major recipients of these OSI funds were such pro-reform organizations as Common Cause ($625,000); Public Campaign ($1.3 million); Democracy 21 ($300,000); the Alliance For Better Campaigns ($650,000); the Center For Public Integrity ($1.7 million); the Center For Responsive Politics ($75,000); Public Citizen ($275,000); and the Brennan Center for Justice (more than $3.3 million).5

The "research" which these groups produced in order to make a case on behalf of campaign-finance reform was largely bogus and contrived. For instance, Brennan Center political scientist Jonathan Krasno had clearly admitted in his February 19, 1999 grant proposal to the Pew Charitable Trusts that the purpose of the proposed study was political, not scholarly, and that the project would be axed if it failed to yield the desired results:

"The purpose of our acquiring the data set is not simply to advance knowledge for its own sake, but to fuel a continuous multi-faceted campaign to propel campaign reform forward. Whether we proceed to phase two will depend on the judgment of whether the data provide a sufficiently powerful boost to the reform movement."

The other seven foundations that, along with OSI, contributed most heavily to the promotion of campaign-finance reform were the Pew Charitable Trusts ($40.1 million); the Schumann Center for Media and Democracy ($17.6 million); the Carnegie Corporation of New York ($14.1 million); the Joyce Foundation ($13.5 million); the Jerome Kohlberg Trust ($11.3 million); the Ford Foundation ($8.8 million); and the John D. and Catherine T. MacArthur Foundation ($5.2 million).

The stated purpose of McCain-Feingold was to purge politics of corruption by: (a) putting restrictions on paid advertising during the weeks just prior to political elections, and (b) tightly regulating the amount of money that political parties and candidates could accept from donors.

Vis à vis the former of those two provisions, the new legislation barred private organizations—including unions, corporations, and citizen activist groups—from advertising for or against any candidate for federal office on television or radio during the 60 days preceding an election, and during the 30 days preceding a primary. During these blackout periods, only official political parties would be permitted to engage in “express advocacy” advertising—i.e., political ads that expressly urged voters to “vote for” or “vote against” a specified candidate. Equally important, major media networks were exempted from McCain-Feingold's constraints; thus they were free to speak about candidates in any manner they wished during their regular programming and news broadcasts. This would inevitably be a positive development for Democrats, who enjoyed the near-universal support of America's leading media outlets.6

In addition to its limits on pre-election political advertising, McCain-Feingold also placed onerous new restrictions on the types of donations which candidates, parties, and political action committees (PACs) could now accept. Previously, they had been permitted to take two types of contributions. One of these was “hard money,” which referred to funds earmarked for the purpose of express advocacy. Federal Election Commission (FEC) regulations stipulated that in a single calendar year, no hard-money donor could give more than $1,000 to any particular candidate, no more than $5,000 to a PAC, and no more than $20,000 to any political party.7

The other category of pre-McCain-Feingold donations was “soft-money,” which donors were permitted to give directly to a political party in amounts unlimited by law. But to qualify for designation as “soft money,” a donation could not be used to fund “express advocacy” ads on behalf of any particular candidate. Rather, it had to be used to pay for such things as “voter-education” ads or “issue-oriented” ads—political messages that carefully refrained from making explicit calls to “vote for” or “vote against” any specific candidate. So long as an ad steered clear of uttering such forbidden instructions, there was no limit as to how much soft money could be spent on its production and dissemination.

McCain-Feingold raised the per-donor maximum for certain hard-money donations: A donor could now give up to $2,000 to a candidate, $5,000 to a PAC, and $25,000 to a political party.8 But the new law banned soft-money contributions to political parties altogether.

Historically, Republicans had enjoyed a 2-1 advantage over Democrats in raising hard money from individual donors. Democrats had relied much more heavily on soft money from large institutions such as labor unions.9 Thus it seems counter-intuitive that George Soros, who clearly favored Democrats over Republicans, would seek to push legislation whose net effect—the removal of soft money—would be unfavorable to Democratic Party fundraising efforts.

But Soros's motive becomes clear when we look at the types of organizations whose fundraising activities were left unaffected by McCain-Feingold. These were “527 committees”—nonprofits named after Section 527 of the IRS code—which, unlike ordinary PACS, were not required to register with the FEC. Run mostly by special-interest groups, these 527s were technically supposed to be independent of, and unaffiliated with, any party or candidate. As such, they were permitted to raise soft money—in amounts unbound by any legal limits—for all manner of political activities other than express advocacy. That is, so long as a 527's soft money was not being used to pay for ads explicitly urging people to cast their ballots either for or against any particular candidate, the letter of the McCain-Feingold law technically was being followed. Practically speaking, of course, such things as “issue-oriented ads” and “voter-education” ads can easily be tailored to favor one party or candidate over another, while carefully steering clear of “express advocacy.”

Once McCain-Feingold was in place, Soros and his political allies collaborated to set up a network of “527 committees” ready to receive the soft money that individual donors and big labor unions normally would have given directly to the Democratic Party. These 527s could then use that money to fund issue-oriented ads, voter-education initiatives, get-out-the-vote drives, and other “party-building” activities—not only to help elect Democratic candidates in 2004, but more broadly to guide the Democratic Party ever-further leftward and to reject the “closed” society that Bush and the Republicans presumably favored. By helping to push McCain-Feingold through Congress, Soros had effectively cut off the Democrats' soft-money supply and diverted it to the coffers of an alternative network of beneficiaries—which he personally controlled.10 That network of beneficiaries constituted the so-called "Shadow Party," which was dominated by Soros. As Byron York observed, “[T]he new campaign finance rules had actually increased the influence of big money in politics. By giving directly to 'independent' groups rather than to the party itself, big-ticket donors could influence campaign strategy and tactics more directly than they ever had previously.... And the power was concentrated in very few hands”—most notably Soros's.11

On January 21, 2010, the Supreme Court—in a case called Citizens United v. Federal Election Commission—overturned McCain-Feigold's prohibition against making political donations during the weeks immediately preceding primaries and general elections. Justice Anthony Kennedy, who voted with the majority (it was a 5-4 decision), wrote: "If the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech." The Court ruling overturned two precedents: Austin v. Michigan Chamber of Commerce, a 1990 decision that upheld restrictions on corporate spending to support or oppose political candidates, and McConnell v. Federal Election Commission, a 2003 decision that upheld the portion of McCain-Feingold that restricted campaign spending by corporations and unions.

In its 2010 decision, the Court explained that the Austin ruling, and hence the operative section of McCain-Feingold, were unconstitutional:

"The law before us is an outright ban, backed by criminal sanctions. Section 441b makes it a felony for all corporations including nonprofit advocacy corporations either to expressly advocate the election or defeat of candidates or to broadcast electioneering communications within 30 days of a primary election and 60 days of a general election. Thus, the following acts would all be felonies under §441b: The Sierra Club runs an ad, within the crucial phase of 60 days before the general election, that exhorts the public to disapprove of a Congressman who favors logging in national forests; the National Rifle Association publishes a book urging the public to vote for the challenger because the incumbent U. S. Senator supports a handgun ban; and the American Civil Liberties Union creates a Web site telling the public to vote for a Presidential candidate in light of that candidate's defense of free speech. These prohibitions are classic examples of censorship."

The Supreme Court ruling did not, however, affect McCain-Feingold's ban on soft money to political parties. In June 2010, the Court affirmed without comment a March decision by the Federal District Court for the District of Columbia, which had ruled that McCain-Feingold's soft-money ban was constitutional.

10 Republicans, meanwhile, did not build any comparable network of independent fundraising nonprofits to circumvent McCain-Feingold—probably because they historically had been successful at raising hard money.